Understanding Commercial Audits and Why Compliance is Important

Many commercial insurance policies are subject to an audit since the policy premium is based upon your total revenue, payroll or some other criteria that the insurance company sets as a basis for pricing.  Mandatory audits are performed in order to collect the appropriate amount of premium for the insured risks.

When applying for insurance, it is very important to review your records and disclose the most accurate and current information about your business.

At the conclusion of the annual policy period, the insurance company will either ask you for your actual figures, send out an auditor or both.  It is extremely important to provide the actual numbers and not an estimate as insurance companies take this process very seriously.

Once you have provided the updated figures and they have been verified, you will get a statement showing either a premium balance due or a credit.  A balance due is actually a positive thing as it means your business did better than expected.  However, if your business did not perform so well, you will get a refund.  The audit cycle repeats itself annually for each policy term.

If your audit reflects a large increase or decrease in payroll or revenue from the figures on your policy, you may want to contact your insurance agent to adjust your current policy term figures to avoid large overages or shortages for the next audit period.

Failure to comply with a company audit request may jeopardize your policy.  Feel free to contact Miller Insurance Associates for more information or assistance with completion of your mandatory audits.

 

Sources:  Rough Notes and Best Review Magazines